With $10 billion in profits in the 2nd quarter, and $3/gallon gas, there are many people complaining about Exxon Mobil. It might even assume the title of Evil Empire from Halliburton. Who Knows!? However, before Exxon is completely condemed there are some points you should all consider:
1. First, if the big oil companies are colluding to raise prices, did they just suddenly realize that they could do this? So when gas was $1-$1.5/gallon did no one in the oil industry think of colluding? All these guys were sitting around a room in 2004 and lamented "Why did we think of it before!?" After nearly a century of sales, the oil companies finally realized that they could just raise prices?
2. Big Oil (Exxon, Chevron, Conoco, Shell, BP, etc) really only controls a small minority of oil reserves....probably 20-25% at most. Many socialist governments' national oil companies, like Sonatrach in Algeria, PDVSA in Venezula, or Aramco in Arabia control the rest.
3. The profit levels already include taxes. Exxon made $36 billion last year, after paying $22 billion in taxes. If Exxon Mobil made no profit and paid no taxes, then the approximately 100 million tax payers in the US would each have to pay $220 extra in order to compensate. (Of course, it could be also argued that if that corporations pass those taxes onto the consumer, so if Exxon had no taxes, the price would be lower).
4. If a bank invests money in a company (in the form of loans), it collects interest on the loan, an expense no one complains about. However, if people (shareholders) invest money in a company, they should also expect a return, in the form of income (profit). If you compare net income (profit) to the shareholder's equity (total assets- total liabilities) you get what's called the return on equity....how much your money is making for you. So if Exxon only made $5 billion in 2005, it's not that much in comparison to the amount of shareholder's equity and people would actually be better off investing in a treasury bonds or a money market account.
5. Finally, even if Exxon decided to be uber generous and reduce gas prices below market value, you would really save that much. In 2005, Exxon had $370 billion in revenue and $59 billion in pre-tax income. Assuming all their revenue came from gas sales (which is doesn't), what could they reduce the cost of gas to, so they would break even?....after doing some basic calculations... $3 gas would become $2.52.
I don't like $3 gas any more than you and it isn't good for the economy. If you have budget of $100/week and gas used to cost $10/week, and now it costs $30, you have only $70 to spend elsewhere, instead of $90. Thus you cut back on clothes shopping or going out to eat... hurting the economy. Cheap energy = good economy.
My advice is for the US to really start to be more independent....REALLY try. That might mean drilling small areas of Alaska (using proper care), or drilling off California or Florida. It's either stopping the "Not in My Backyard" syndrome or accept $3 gas.
So what's the one reason to blame Big Oil? The consistency in pricing changes. If something happens to spike the price of crude oil, the price of gasoline immediately jumps. However, the gas coming out of the pump that day was made from crude purchased a few weeks ago at a cost of say $40, not $70. Now, if something happens to make the price of crude drops from $70 to $40, the price of gasoline wouldn't drop until the crude oil pulled from the ground that day make its way overseas, through the refinery, and to the pump... a process which could take a few weeks. They get the best of both worlds. So the difference between when the price at the pump jumps to when the actual higher priced crude reaches the pump is pure profit.
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